4 Vanguard ETFs to Buy With $2,000 and Hold Forever

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A common advice on Wall Street is to allocate approximately 60% of your investments towards stocks and the remaining 40% towards bonds, forming a well-balanced investment portfolio. If you have a more daring approach, you might consider an 80/20 split, while those who prefer caution could opt for a 40/60 split. The key is to combine stocks and bonds to develop a straightforward portfolio that can be managed effectively over the long haul.

Starting with $2,000 as a novice investor, here’s some valuable guidance: Consider these four Vanguard traded funds (mutual funds or ETFs) to build a lifelong investment portfolio.

Why mix stocks and bonds?

A swift and substantial increase in wealth can be achieved by purchasing a single investment that’s predicted to significantly increase in worth, although it’s essential to remember that Wall Street doesn’t offer any guarantees – this strategy could also lead to substantial losses. A more balanced approach is to allocate some of your funds towards growth ventures while investing the rest in a diversified portfolio to mitigate the risks associated with these high-growth opportunities.

A simple approach to increasing the variety in your investments is by combining equities (stocks) and fixed-income securities (bonds) within a single portfolio. Historically, stocks have been responsible for growth, while bonds have provided stability. In periods when stocks are on an upswing, bonds may not perform as well. However, when stocks are declining, bonds often show better performance, helping to maintain balance. The introduction of exchange-traded funds (ETFs) has made it effortless to construct a well-balanced portfolio of stocks and bonds that suits your investment goals. Vanguard is a reliable choice for many investors, especially those focusing on income generation.

The stock side of the balanced portfolio

Investing in individual stocks may bring joy for some, but it’s an ordeal for others. If you wish to avoid the stress, opt for a stock exchange-traded fund (ETF) instead. Dividend stocks can be appealing because they offer a real return through dividends, and companies typically need a good financial standing to pay such dividends. A convenient method to incorporate dividend stocks into your investment portfolio is by using Vanguard High Dividend Yield ETF (VYM).

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The Vanguard High Dividend Yield ETF gathers U.S. companies that pay dividends and organizes them based on their yield. It selects the top 50% of these companies with the highest yields, resulting in a diverse portfolio of over 580 stocks. The yield for this ETF is around 2.8%, which is more than double the yield of the S&P 500 index (^GSPC).

While Vanguard High Dividend Yield ETF primarily focuses on the U.S. market, it’s essential to acknowledge the vast array of dividend-paying stocks globally. To diversify and maximize returns, you might consider complementing it with Vanguard International High Dividend Yield ETF (VYMI). This ETF mirrors its U.S.-focused counterpart by investing in international stocks but boasts a diverse portfolio of over 1,500 global equities. Its dividend yield stands at 4.1%. Although you may prefer more U.S. stocks, owning both these ETFs will ensure a well-rounded equity exposure for your balanced portfolio.

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To divide your funds for these two ETFs according to the 60/40 split, approximately $840 should go towards the U.S.-focused Vanguard High Dividend Yield ETF (60% – 75% of the total), while the remaining $360 would be allocated to the other ETF.

Punt on the bond side and buy everything

As an observer, I’ve noticed that many investors often underestimate the intricacy and magnitude of the bond market compared to the stock market. Picking individual bonds can be a daunting task for most investors due to its complexity. However, Exchange-Traded Funds (ETFs) like the $800 remaining in this portfolio could be an ideal choice. But let me clarify, Vanguard offers a simplified solution through their Vanguard Total Bond Market ETF (BND). Essentially, what this fund does is invest in the entire U.S. bond market, making it a convenient and efficient method for those who prefer a broader approach.

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Once more, it’s important to remember that the United States is only one part of a vast global landscape. That’s why Vanguard provides another option: the Vanguard Total International Bond Market ETF (BNDX). Similar to the stock market, having two ETFs gives you a broadly diversified international bond portfolio. The yield for Vanguard Total Bond Market ETF is approximately 3.8%, while that of Vanguard Total International Bond Market ETF hovers around 4.2%.

For optimal results, it’s advisable to maintain between 60% and 75% of your bond portfolio in domestic bonds, while allocating the remaining percentage to international bonds. The primary aim is diversification, which will be significantly achieved through these ETFs as they essentially purchase a wide array of bonds available on the market.

Simple and set for a life of income and growth

Building a portfolio with these four Exchange-Traded Funds (ETFs) won’t instantly make you wealthy, but if past trends are any indication, it will offer steady income and growth potential in the long run. To get started, you only need to execute four trades initially, and four more trades annually to adjust your allocations as needed. Since these Vanguard ETFs have a broad-based structure, you won’t have to spend much time worrying about their individual performances. Instead, you can simply relax and enjoy the rewards of owning a well-diversified income-focused portfolio over an extended period.

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2025-07-19 13:20